Could Virginia review a county's BTPP manufacturer-classification denial when the letter cited a BPOL statute and was not issued by an authorized final decision-maker?

Plain-English summary

A company producing ready-to-serve airline meals filed BTPP refund claims for 2012 through 2016, arguing it should be classified as a manufacturer instead of a business service. The county denied the claims and told the company that further review belonged in circuit court.

The Department remanded the case: the county could not take away the taxpayer's administrative-appeal option, but its letter was not a valid final local determination for Department review.

Refund denial can create an appealable assessment

When a locality denies an amended local-business-tax return or refund claim, it has determined the proper tax amount. That denial can qualify as an assessment for appeal under Va. Code § 58.1-3983.1.

Virginia provides two distinct paths:

• Va. Code § 58.1-3980, followed by circuit-court review under § 58.1-3984; or
• the administrative local-business-tax route under § 58.1-3983.1, which can lead to Department review within 90 days after the local final determination.

The county could not abrogate the second route merely by telling the taxpayer to go to court.

Why the county letter was defective

First, the letter cited Va. Code § 58.1-3703(C)(4), the BPOL manufacturing exemption. The dispute concerned manufacturer classification for BTPP, so that citation did not supply the correct jurisdictional basis.

Second, the county's director of personal property signed the letter. Nothing showed express designation by the Commissioner of the Revenue or chief assessing officer to issue final local determinations. 23 VAC 10-500-710 also requires specific language in a final determination.

Without a compliant final decision, the Department lacked jurisdiction to decide the manufacturer classification.

What happens next

The county had to issue a proper final local determination under the local-business-tax appeal guidelines. The taxpayer could then select and follow the available local route. If it proceeded under Va. Code § 58.1-3983.1 and remained dissatisfied after the final decision, it could appeal to the Department.

What this means for you

• A refund denial can be an appealable event. The assessment need not change on the locality's books.
• Localities cannot choose your exclusive statutory route for you. Court and administrative tracks are distinct.
• Check the correct tax statute. BPOL manufacturing language does not resolve BTPP classification.
• Signer authority matters. A final letter needs the assessing officer or evidence of an expressly authorized designee.
• The manufacturing issue remained undecided. The ruling addressed process, not whether meal production qualified.

Common questions

Q: Did Virginia classify the company as a manufacturer?

A: No. It remanded for a valid local determination and did not reach the merits.

Q: Could the county force the taxpayer to use only circuit court?

A: No. The ruling says the county could not abrogate the administrative appeal rights provided by § 58.1-3983.1.

Q: Why wasn't the director's signature enough?

A: The record lacked evidence that the Commissioner of the Revenue or chief assessing officer expressly designated that person to issue final determinations.

Citations and references

• Va. Code § 58.1-3980 — local correction route
• Va. Code § 58.1-3983.1(B)(1) — local-business-tax administrative appeal
• Va. Code § 58.1-3984 — circuit-court review
• 23 VAC 10-500-710 — final local determination requirements
• Va. Code § 58.1-3703(C)(4) — BPOL manufacturing exemption cited by county
• Related Virginia rulings/guidance: P.D. 04-28, P.D. 10-103, P.D. 11-124, P.D. 15-105, P.D. 18-140

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-62

Original ruling text

June 17, 2019

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business Tangible Personal Property Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by * (the “Taxpayer”), with the Department. The Taxpayer appeals a determination issued by *** (the “County”) concerning whether it was exempt from the Business Tangible Personal Property (BTPP) tax for the 2012 through 2016 tax years because it should have been classified as a manufacturer.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections cited are available online in the Laws, Rules and Decisions section of the Department’s web site, located at www.tax.virginia.gov .

FACTS

The Taxpayer is a producer of ready to serve meals for airliners. It filed its BTPP tax returns classifying itself as business service. The Taxpayer subsequently filed refund claims pursuant to Virginia Code § 58.1-3980 with the County for the 2012 through 2016 tax years, contending it should have been classified as a manufacturer for purposes of the BTPP tax.

The County denied the refund request for the 2012 tax year on the basis that it was outside the statute of limitations. It further denied the refund requests for the 2013 through 2016 tax years, concluding that the Taxpayer was a business service. The County instructed the Taxpayer that any additional appeals were to be filed with a circuit court pursuant to Virginia Code § 58.1-3984. The Taxpayer appealed the County’s determination to the Department.

ANALYSIS

Appealable Event

Under § 1.4 of the Guidelines for Appealing Local Business Taxes, issued as Public Document (P.D.) 04-28 (6/25/2004), an “assessment” is defined as “a determination as to the proper rate of tax, the measure to which the tax rate is applied, and ultimately the amount of tax, including additional or omitted tax, that is due.” When a taxpayer files an amended local business tax return, the local taxing authority must make a determination as to the proper amount of the tax. If the locality denies the refund, it has made a determination as to the proper amount of tax, even if the assessment on that locality's books is not changed. Consequently, the denial of a refund by a local taxing authority would constitute an assessment for purposes of filing an appeal under Virginia Code § 58.1-3983.1. See P.D. 10-103 (6/18/2010).

Virginia Code § 58.1-3980 provides that any person aggrieved by an assessment of local taxes “may, within three years from the last day of the tax year for which such assessment is made, or within one year from the date of the assessment, whichever is later, apply to the commissioner of the revenue or such other official who made the assessment for a correction thereof.” Under this procedure, if the taxpayer disagrees in whole or in part with the local assessing officer’s determination, the taxpayer may then seek correction with the circuit court under the provisions of Virginia Code § 58.1-3984.

Virginia Code § 58.1-3983.1 B 1 provides that any person assessed with a “local business tax . . . may appeal such assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of such assessment, whichever is later, to the commissioner of the revenue or other assessing official.” Under this provision, if the taxpayer’s appeal is denied in part or completely by the local assessing official, the taxpayer may, within 90 days, appeal the assessment to the Department.

When responding to requests for refunds of local taxes, local taxing officials have the discretion to simply deny the request or issue a final determination. When a final determination is not issued by a locality, a taxpayer may file an appeal within the statutory time prescribed with the locality as provided under Virginia Code § 58.1-3983.1 B 1. Alternatively, if the locality issues a final determination, the taxpayer may proceed to file an appeal with the Department. See P.D. 11-124 (7/1/2011) and P.D. 15-105 (5/12/2015).

In this case, the Taxpayer requested a refund from the County for the tax years at issue as permitted under Virginia Code § 58.1-3980. The County issued a determination to the refund request in lieu of denying the refund and instructed the Taxpayer to direct any further appeal pursuant to Virginia Code § 58.1-3984. Because the Taxpayer’s refund request was made properly under Virginia Code § 58.1-3980, the County cannot abrogate the Taxpayer’s right to appeal in accordance with the process established in Virginia Code § 58.1-3983.1.

Local Determination

The County cited Virginia Code § 58.1-3703 C 4 as the subject in its determination letter. This code section addresses the manufacturing exemption for the Business, Professional, Occupational License (BPOL) tax, not BTPP tax jurisdiction.

In addition, under Title 23 of the Virginia Administrative Code (VAC) 10-500-710 and P.D. 04-28, “local assessing officer” means the Commissioner of Revenue or chief assessing officer or his designee. Therefore, to qualify as a final local determination, the letter should normally be signed by the Commissioner of the Revenue or chief assessing officer and not an employee working at their direction, unless the individual has been expressly designated by the Commissioner of the Revenue or chief assessing officer and evidence of such designation is included with the final local determination. See P.D. 18-140 (3/30/2018). Additionally, Title 23 VAC 10-500-710 contains specific language that must be included in any written final determination.

In this case, the local determination was signed by the County’s director of personal property. Nothing in the determination shows that this person was expressly designated by the Commissioner of the Revenue or chief assessing officer to issue final local determinations.

DETERMINATION

For the reasons stated above, the Department lacks jurisdiction to address this appeal. I am remanding this case back to the County with instruction to fulfill its obligation under Virginia law to issue a final local determination in accordance with P.D. 04-28. Once a proper final local determination has been issued, the Taxpayer, if it is not satisfied with such determination, may file an appeal with the County under either Virginia Code § 58.1-3980 or § 58.1-3983.1 within the time prescribed by law. If the Taxpayer files a local appeal under Virginia Code § 58.1-3983.1 and is not satisfied with the County’s final determination, it may file an appeal with the Department.

If you have any questions regarding this response, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/2009.B

Related Documents

04-28

10-103

11-124

15-105

18-140